Question of the Week

What should the the Fed do now?

Hike and Keep Hiking
Hike and Pause
Pause
Cut

Investors came out of their foxholes yesterday (defensive sectors), and did some bargain hunting in Financials (XLF) and Energy (XLE). This is a good thing. Remember ‘buy low – sell high?’

The second wave of targets were high Beta sectors, Consumer Discretionary (XLY) and Communication Services (XLC). Chasing performance isn’t a bad idea in a market where momentum can become entrenched.

Market Breadth & Leadership

Market breadth was strong,, although new highs have a way to go before triggering a buy signal.

Market Breadth	NYSE	NASDAQ
Advancers	2,392	3,311
Decliners	679	1,211
New Highs	25	60
New Lows	44	127
Up Volume	4.08 billion	3.82 billion
Down Volume	749.58 million	992.89 million

Other indicators, like the Volatility Index (VIX), were down a lot, and Put/Call Ratio made dramatic reversals.

The VIX made several intraday moves above 30 but never closed there and is now on the verge of dipping back under 20. Contrarians point to that as a buy signal, but recently it has pointed to market strength.

Industry Watch

There was a big move in automobiles, led by electric vehicle (EV) makers XPeng (XPEV) and Tesla (TSLA).

There were other top moving industries.:  I’m intrigued with Recreational Services as the Fed wants to squeeze out service sector inflation.

Here Come the Fed

Speaking of the Fed - today is the day we have been waiting months for. Okay, not months, but it sure has felt that way.

A 25-basis points (bps) hike is a given at this point, but what happens next?

The CME FedWatch Tool sees a rate hike today, and at the next meeting, followed by a series of rate cuts that add up to 150-basis points (bps) by next July.

Today, the Fed’s Dot-Plot will play a pivotal role in how the market reacts. The Dot-Plot will unlikely suggest the kind of rate cuts the Street is looking for.

Portfolio Approach

There are no sector weighting changes in our Hotline Model Portfolio this morning. 

Today’s Session

The street has mixed expectations. I would like to see the Fed pause in light of all the emergency measures taken it would seem odd.  It would be like moving into a building ablaze because the fire department is across the street.

Tweet

 

Home | Products & Services | Education | In The Media | Help | About Us | Disclaimer | Privacy Policy | Terms of Use | All Rights Reserved.